The Ethiopian Diaspora Business Conference aims to make a business case for investing in Ethiopia and illustrate exactly how the Diaspora community can benefit from the investment opportunities that exist in the country, while supporting the ongoing development and growth of the Ethiopian economy.
Crude calculations using remittance figures (USD 1.1 billion in the first 9 months of 2006/07 alone) show that the Gross income of Ethiopians in the Diaspora is in the range of 10-20 billion USD per annum, roughly equal to the home country’s GDP of 13 billion USD in 2006. As we approach the New Ethiopian Millennium, advances in communications technology have made it easier for Ethiopians across the globe to connect and do business. There are significant untapped opportunities that exist in this equation for all parties involved. The Diaspora can reap the benefits of investing in a growing home economy or stay behind and make profits by facilitating the import of quality Ethiopian products into their home countries. At a time when global competitiveness decides the fate of nations, some of the capital, world class know-how, and market access necessary for the survival of the Ethiopian nation can be provided by the Diaspora.
“Back in the old days, our forefathers fought off colonization using spears, guns, and even their bare hands.” said Ato Henok Assefa, Managing Partner at Precise Consult who also happens to be an ex-Diasporan who grew up in New York City. “Times have changed, however. The survival of the Ethiopian state now depends on building the competitiveness of Ethiopia’s industries. Be competitive or perish is the order of the day. And in this endeavor, utilizing the Diaspora who already possess world class know-how and capital is a no-brainer for Ethiopia”
Indeed the Ethiopian Diaspora’s contribution is already notable. In addition to the large amount of money entering the country as remittance by the Diaspora, direct investment over recent years has run into the hundreds of millions of dollars. While still at a nascent stage, export opportunities facilitated by the Diaspora are starting to make an impact using the duty free and quota free access Ethiopia enjoys to the United States and European markets. However, given the potential that exists, these numbers are only indicative of this important group’s possible contribution to the Ethiopian development agenda in the form of investment (FDI), business partnerships, advisory services to local businesses, and participation in the local debate on improving the investment climate.
Ato Henok says this is partly due to a lack of coherent information and strategic engagement with the Diaspora community. “It is surprising how many Diasporans we have met who say to us, I have 150,000 dollars and would like to invest it in Ethiopia. Where do I go? How do I start? They all seem to have an irresistible urge to contribute to the country but do not know how to begin. The lack of basic information and facilitation services to navigate the local beaurocracy are quite possibly undermining a large influx of investment and exporting opportunities from being realized. So this is basically how the idea for the conference and associated support services to be disclosed soon came about.”
The conference is divided along two main themes with expert panels to discuss the prevailing business conditions in Ethiopia and a mini-information/products tradeshow. The first theme is aimed at de-mystifying the process of doing business in Ethiopia. With a legacy of communism and a history of a beaurocratic regulatory culture tarnishing the image of the Ethiopian business environment, few are aware of the significant improvements achieved over the past few years. Even fewer are bold enough to venture in and find out what it takes to invest in Ethiopia. There appears to be a gap between the perception and reality of doing business in Ethiopia. What is the experience of investors so far in this regard? Where are the opportunities and constraints to investing in Ethiopia? Key issues such as investment process, land acquisition, finance, etc. will be discussed based on the experiences of a panel of successful diaspora investors.
The second theme focuses on the investment opportunities and incentives that exist on the ground. With an economy expanding in double digits per annum, exports growing at almost 30% per year and a fast improving investment environment, Ethiopia now offers the prospect of high returns in many sectors. This panel will discuss where some of these high potential sectors lie and showcase concrete opportunities for investment. The panel will also discuss emerging opportunities for the diaspora to link with local producers and import Ethiopian products into their adopted home countries.
The First Annual Ethiopian Diaspora Business Conference which is being organized with the financial support of The World Bank and USAID VEGA Ethiopia AGOA+ is scheduled to take place on September 19, 2007 at the UNECA conference center. “We hope that this conference will provide profound insights into the possibilities of doing business in Ethiopia and also create export linkages with local export ready producers and members of the Diaspora community. For more information on the Ethiopian Diaspora Business Conference, please visit www.DiasporaInvest.com. As space is limited, those interested to participate are advised to register online as soon as possible.
he Potential of Greater Ethiopia
A Nation Beyond Borders. The Rise of a Globally Interconnected Ethiopian Entity and the Promise it Holds for Development
By Joshua Yau and Henok Assefa,
Originally published on The Ethiopian American (www.theethiopianamerican.com)
Within the space of the past 35 years, Ethiopians have spread across the globe and some 1-2 million of them now call North America, Western Europe, The Middle East, and parts of East and Southern Africa home. Over the same period, this Ethiopian Diaspora has grown in financial and technical capacity and managed to largely integrate themselves into their adopted countries. All the while, they have continuously harbored a longing to either return home or at least help their families and friends who have not been so fortunate to escape the quagmire of poverty and civil war. As we approach the third Ethiopian Millennium, the world in which Ethiopia and Ethiopians reside has changed in fundamental way to make just this possible.
Advances in communications technology have made it possible for the Ethiopian Diaspora to keep connected to each other across the globe and indeed to friends and family back home. Voice over IP (VOIP) technology, cheap phone cards, web aggregators, blogs, and sites such as YouTube, Google, and Yahoo Groups! are helping to create a ‘virtual Ethiopia’. In fact, what is beginning to emerge is a new Ethiopian entity, a Greater Ethiopia, beyond the legally recognizable physical borders spanning the entire globe. Combined with the end of civil war, better investment environment, and a booming economy back home, there exists today a potentially large win-win arrangement in which Ethiopians the world over can all benefit economically.
Defining the “Other Half” Economically
The International Monetary Fund reckons that Ethiopians in the Diaspora sent home USD 800 million in 2005 . This figure roughly doubles if money transferred through unofficial channels, such as in person or mail deliveries are included. These cash transfers alone may equal around 10 – 20% of Ethiopia’s USD 13 billion GDP. The potential for growth is even brighter. If Diaspora Ethiopians were to send no more than a tenth of their total annual income home, it is conceivable that the net value of their remittance may equal Ethiopia’s Gross National Product (GNP) .
The Ethiopian Diaspora’s economic strength is just one of its potential benefits to the country. Other major strengths of the Diaspora include a vast pool of trained human capital. An International Organization for Migration (IOM) report estimated that Ethiopia lost 75% of its human capital – including a third of its doctors – from emigration between 1980 and 1991 . The loss in business management and other technical skills are likely at least as severe.
People who move to developed societies also tend to acquire other intangible skills. The bulk of the post-1974 émigrés now have had more than 20 years to get acquainted with Western management styles, business discipline, and technology. Someone who worked for a multinational corporation understands the importance of attending meetings on time and answering back to clients promptly. An IT manager in an industrial country has seen how Internet can speed transactions and enhance promotions – not to mention knows how to manage a multi-team project. A simple visit to Starbucks reveals what customer service can do to a business – and what it looks like. Moreover, the Ethiopian-Americans, -British, -Dubaians know what the customers in these markets desire and how they do business. Some perhaps even have connections and influences. These are all skills and know-hows severely needed and lacking in Ethiopia.
The “Other Half” as Agents of Change at Home
Members of the Diaspora are among the most powerful, capable and focused development agents for Ethiopia. The macro view of the Diaspora’s power only partly conveys the influence they can each exert individually. In fact, the Ethiopian Diaspora returnees represent a reverse side of the brain drain. The difference in living standards and technology, a little money and know-how from the developed world goes a long way back home.
Interviews conducted with recently returned expatriates shows the promise of the Diaspora community. A returned Canadian Ethiopian who worked in hotel management for the Hilton for more than a decade and wanted to come back to contribute to the country’s development put it this way:
“If we don’t come back and face the hardship [of development] here, who is going to come?” he told himself. He added “if I can create just one job, that is contribution.”
After many years of, sometimes admittedly difficult, trials and errors, he now employs 55. These 55 employees probably support several hundred people in turn.
In another example, an Ethiopian American who works for a garment distributor, with the help of USAID’s AGOA project, successfully placed a USD 1 million garment export order. This large garment order possibly will increase the country’s total non-agricultural export by up to 5% , single-handedly. With several more millions orders likely to come in the future from this Diaspora buyer, the potential for expanding export in this sector is bright. It is tough to imagine where else this type of impact can be achieved.
Then there is the progress in business savvy brought by the Diaspora. Arguably already the best known international business to come out of Ethiopia, Ethiopian Airlines has been flying even higher since the arrival of CEO Ato Girma Wake, once a member of the Diaspora. Since his takeover, Ato Girma has emphasized the state owned airliner’s modernization efforts on customer service and global competitiveness. Ethiopian Airlines is currently projected to earn USD 1 billion and reach about 50 international destinations by 2010, a phenomenal feat for a country currently marginalized in every measure of world trade.
But the business savvy is also starting to reach smaller investments as well. Recently, when a cup of coffee took too long to come at a recently opened trendy Café establishment in Addis started by an ex-Diaspora, the on-duty manager walked out, apologized, and offered the customer to have it for free. This unfamiliar level of customer service has deeply surprised many Ethiopians. There are more examples than this page can hold.
The Home as an Opportunity for the “Other Half”
An expatriate’s involvement in Ethiopia’s economy is beneficial to both the expatriate and the country. Many argue that Ethiopia is now a great place to do business. GDP has been growing by double-digits for three consecutive years. Various business environment indicators score well above Africa’s average. A national Industrial Development Plan has been passed, outlining export-oriented strategies for sectors such as coffee, leather and flower, whose exports grows at more than 200% per annum. The government has put many incentives in place, including a loan guarantee for 70% of the capital requirement for an investment on ‘priority sectors’. International organizations and IT professionals continue to sprawl into Addis Ababa, creating demands for high-scale services as well as capacity for niche high-value technical businesses. A day’s tour around Addis Ababa will reveal as many buildings in construction as established buildings.
The returned entrepreneur mentioned above heard news that the government was trying to induce investment, and came back to test the environment as a tourist for two weeks. To his surprise, he found that the government agencies were inviting. He was able to get direct access to the needed people at the Investment Agency and other secretaries with no prior connection. The incentives were hard to refuse. Land was offered at 70 cents per square meters, “which is like free”, he said. “You might not get things done in the way you do in the US, but have to understand Ethiopia and America are not the same,” he conceded. “Yet, the business opportunities are here. As long as you learn how to navigate the bureaucracy, the private environment is very advantageous.” After an attempt at building a hotel consultancy failed since the local hotels were not ready to embrace professional practices yet, he quickly moved on to other entrepreneurial opportunities.
Today, he owns a fiber glass manufacturing shop and a fish processing plant in joint venture with Italian partners. When asked about the difference in his living standards between now and the day when he was Operating Manager of The Hilton Hotel in Toronto, he replied, “Oh, there is no comparison. Much higher. It is much higher now. It’s got to be when I am employing 55 people.”
Moreover, the superior management and technological know-how that the Diaspora possesses, as discussed above, give them an unique competitive advantage in this environment to make profits out of opportunities. Spend a few months in country and it is not hard to see that many of the most successful businesses are started and run by people who had first-hand foreign exposure. As the economy steers itself for export-driven growth, the new business leaders will need to understand what foreign customers demand; the ones with established contacts with foreign buyers will excel even more.
Where Do I Put My Money?
The Ethiopian Diaspora wants to invest back in their homeland. Unlike other Diaspora groups, such as the Armenians, who are typically second-or-more generations removed, the Ethiopian Diaspora is made up of almost entirely first generation and still maintains fresh and emotional links to their country. Most expatriates we interviewed so far expressed strong desire to come back and do business in Ethiopia at some point soon. Of those who returned, none of them regretted their decision to return home.
But many of the people we interviewed said they do not know where to put their money. What sectors are growing, which geographical areas are best to put in a factory, whom to trust, and how does one determine these things? We have talked to several people who have accumulated more than USD 100,000 in investable assets, would like to invest in Ethiopia, but do not know where to start. Worse, there are some that are turned off by Ethiopia’s regulatory obstacles. A prospective Diaspora returnee we talked to expressed his desire to invest and be a part of the country’s development. But, due to the burdensome regulatory structure and weak telecommunication infrastructure, he was forced to divert his invest to Kenya and South Africa instead.
Putting it all Together: A One Stop Shop for the Diaspora
In the absence of a well developed integrated scheme to lure the global Diaspora into the Ethiopian economy in a productive way, the current level of involvement is only indicative of the immense potential the Diaspora holds for development. Taken together, through remittances, direct investments, and increased export opportunities, it is not hard to see the significant role the Ethiopian Diaspora is already playing in earning foreign currency and job creation into the Ethiopian economy. In fact, the Diaspora can be much more important for Ethiopia, even more so than foreign direct investment and development assistance.
But how to translate this potential into results is a key challenge. While economic performance and third-party assessments suggest that the overall business environment is changing for the better (World Bank’s most recent Investment Climate Survey found that most areas of regulations have significantly improved), bureaucracy and regulatory transparency often take a long time to fix. More immediate stop-gap solution will reap a large benefit.
The authors of this paper argue that what’s needed is a one-stop shop for the Diaspora focusing exclusively on business related services. We are working on a project and work plan to establish a Center that will facilitate all investment and trade needs of the Diaspora. The Center (and its website) will provide comprehensive and easy-to-understand information on all aspects of business regulations. It will also have database on which investment opportunities and suppliers are reliable and high-performing (tested by various due diligence processes), and trained agents to handle specific inquiries from interested investors. Finally, it aims to form special relationships with government agencies to allow it to facilitate and ‘fastrack’ permitting and land access processes. It can also arrange meetings and help ‘follow up’ with potential local partners. (Please see the end of this article for more information about how you can get involved and contribute*).
The Greater Ethiopia Concept and Its Policy Implications
As argued earlier, the GDP of Ethiopians living abroad is now at least as large as the one within Ethiopia’s geographic borders. These facts and trends are inevitably changing the way we think about and define the Ethiopian economy. Discussions around a development policy therefore must now start to include the “other half of the Ethiopian economy” and how to integrate it for better value addition system-wide. Such an approach can help to increase incomes for Ethiopians the world over.
In the areas of direct investment and trade development, national and donor policy makers should pay a lot more attention to the potential and promises of the Diaspora as a development force. Today the Diaspora is treated more or less on equal ground as other foreign investors and importers. But we believe they are a lot more important. No export strategy, sector planning, or linkage building should be done without considering the Diaspora at the forefront. Just as the government put in economic, preferential incentives for priority sectors, it can equally view Diaspora as a sector with strong natural endowment, and put in preferential incentives to facilitate their impacts to the economy. This would imply, for examples, preferential economic incentives, dedicated government agencies and access process, and tailored supporting services, such as access to finances and legal money-pooling mechanism for shared companies. And this could be even more productive if an offer of dual citizenship is considered along the lines of what the Indian government is doing to integrate its sizable global Diaspora into its economy ‘within borders’. These seemingly drastic steps are not superfluous considering the developmental impacts that the Diaspora has demonstrated for the country.
Members of the Diaspora want to invest back because they care about the country’s development, and because they want to make profits. So they should. We are at a point in the country’s development that the two objectives coincide. Ethiopia will only be better off if they continue to do so. The government should consider the potential of the Diaspora in economic terms separately from their stands on political terms. The Diaspora should, at least, as our succeeded hotelier-turned-plant-owner advocated, “come, and see the country for yourself. Come and see whether it is like what you heard. You will never regret it.”
*The Ethiopia Diaspora Investment and Export Center project, promoted by Precise Consult International (PCI), is conducting a large, anonymous online survey to understand the exact services that are needed by the Diaspora.
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